Forex Flash: RBA to cut rates by 25bp in December, further cuts in February 2013 - JP Morgan
FXstreet.com (Barcelona) - JP Morgan global FX strategy team sees the RBA cutting by 25 bps in December 2012, followed by a further cut in February 2013.
The bank anticipates more cuts based on weakening domestic data, and forecast of Australian GDP growth of only 1.7% in H2 of 2012, which according to JPM, will reflect "a tepid labour market."
A slowing in the mining boom is the main concern in view of JP Morgan. "Despite mining investment has grown strongly, by around 70% over the past year, many companies are adopting a more cautious approach... " JPM notes.
The OIS curve stands around 60 bps of cuts over 2013, but "the cash rate could fall more rapidly if the unemployment rate moves sharply higher (for example, to 6.0% by Q1 of 2013)" notes JPM.
Alternatively, "we might get a more drawn out cycle as the RBA takes its time to adjust to a different mix of financial conditions, and to assess how the two key global downside risks play out" the bank concludes.
The bank anticipates more cuts based on weakening domestic data, and forecast of Australian GDP growth of only 1.7% in H2 of 2012, which according to JPM, will reflect "a tepid labour market."
A slowing in the mining boom is the main concern in view of JP Morgan. "Despite mining investment has grown strongly, by around 70% over the past year, many companies are adopting a more cautious approach... " JPM notes.
The OIS curve stands around 60 bps of cuts over 2013, but "the cash rate could fall more rapidly if the unemployment rate moves sharply higher (for example, to 6.0% by Q1 of 2013)" notes JPM.
Alternatively, "we might get a more drawn out cycle as the RBA takes its time to adjust to a different mix of financial conditions, and to assess how the two key global downside risks play out" the bank concludes.
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